In recognition of the significance South America has played in recent FCPA enforcement, yesterday the FBI announced that it will establish a team of agents in Miami focused on FCPA cases in Miami and South America. Leslie Backschies, the Chief of the FBI’s international corruption unit, told reporters on March 4, 2019, that the new
The U.S. Department of Justice (“DOJ”) continues to pursue Venezuelan nationals through high-dollar and high-profile money laundering and foreign bribery charges. The latest development in this ongoing saga is the recent sentencing of the former national treasurer of Venezuela, Alejandro Andrade Cedeno (“Andrade”), by the Southern District of Florida to a decade in prison, after Andrade pleaded guilty last year to a single-count information charging him with conspiracy to commit money laundering (specifically, a conspiracy to violation 18 U.S.C. § 1957, the so-called “spending” money laundering provision, which requires transactions involving over $10,000 in criminal proceeds, but no specific intent) in an alleged sprawling bribery and money laundering scheme. His plea agreement (the “Plea”) was one of several connected proceedings unsealed on November 20, most notable of which is the grand jury indictment (the “Indictment”) of fugitive Raúl Gorrín Belisario (“Gorrín”), the owner of Venezuelan cable news network Globovision, erstwhile resident of Miami, and alleged architect of the money laundering conspiracy.
Although he retired to Florida after having served as the head of the Venezuelan treasury, Andrade did not begin his career in the world of high finance. Rather, his climb to power and wealth began when he used to serve as the bodyguard for the President of Venezuela, Hugo Chavez.
As we will discuss, there is more to come. Aside from telling a lurid tale of corruption rewarded through high-end bribes involving aircraft, real estate (widely acknowledged as a major vehicle for laundering) and thoroughbred horses, Andrade’s plea agreement contains cooperation language, and his counsel has stated publically that Andrade has been cooperating with the DOJ for some time. Notably, Andrade was charged only with a single count of Section 1957, which has a statutory maximum sentence of 10 years – exactly the sentence imposed on Andrade, whose advisory Federal Sentencing Guidelines range was presumably much, much higher. It is fair to assume that Andrade will be pursuing a second sentencing hearing at which his sentence could be reduced based on his cooperation with the government.
Andrade’s case is part of a steady stream of money laundering and bribery charges recently brought by the DOJ which relate to Venezuela, which is reeling from massive inflation and a near-existential economic crisis that is inflicting widespread suffering. His case also represents another instance of the DOJ’s increasing tactic of using the money laundering statutes to charge foreign officials who cannot be charged directly under the Foreign Corrupt Practices Act (“FCPA”).…
Continue Reading Another Sprawling Money Laundering and Bribery Scheme Involving Venezuela: Currency Exchange Rate Manipulation, Rewarded By Aircraft, Real Estate, and Thoroughbred Horses
As forecasted in a blog post last summer, the United States Department of Justice (“DOJ”) has again used the money laundering statute to accomplish the otherwise elusive goal of prosecuting foreign officials who allegedly receive bribes. On Monday, DOJ unsealed its Indictment against five Venezuelans employed by or closely connected to Petroleos de Venezuela S.A. (“PDVSA”), the Venezuelan state-owned and state-controlled oil company.
The unsealing of the charges against these five Venezuelan individuals marks the latest development in a multi-year effort by DOJ to investigate and prosecute bribery at PDVSA. As DOJ’s press release notes, ten individuals have already pleaded guilty in the investigation thus far. Key among these individuals are Roberto Enrique Rincon Fernandez and Abraham Jose Shiera Bastidas, two American businessmen who pleaded guilty in 2016 to violating the Foreign Corrupt Practices Act of 1977 (the “FCPA”) for paying bribes to PDVSA. In connection with their pleas, the two admitted to paying PDVSA bribes in order to win lucrative energy contracts and to be given payment priority over other PDVSA vendors during a time when PDVSA faced a liquidity crisis.
Last October, more than one year after these guilty pleas, Spanish police announced the arrests of four of the five individuals named in Monday’s Indictment. The arrests were described as “part of a months-long sting ordered by the U.S. Department of Homeland Security.” Currently, three of the defendants remain in Spain pending extradition, the fourth was extradited to the United States and made his initial appearance last Friday, and the fifth remains at large.
As noted above, the Indictment is notable for using the money laundering statute to accomplish what the FCPA statute cannot—bringing charges against a foreign official. Last summer, we blogged about the conviction and sentencing of Guinea’s former Minister of Mines and Geology. There, we noted the FCPA generally prohibits individuals and businesses from paying bribes to foreign officials to assist in obtaining or retaining business. However, “foreign officials” cannot be charged under the FCPA or with conspiracy to violate it. Therefore, a foreign official could not be prosecuted for his conduct in soliciting or receiving bribes under the FCPA.…
Continue Reading DOJ Employs Money Laundering Statute to Prosecute Venezuelan Oilmen for Foreign Bribery
The Office of Foreign Assets Control (“OFAC”) wrapped up 2017 by issuing a series of high-profile designations generally prohibiting U.S. persons from conducting financial or other transactions with the identified individuals and entities, and freezing any assets which these individuals and entities may have under U.S. jurisdiction. Specifically, OFAC, acting in conjunction with a new Executive Order issued by the President pursuant to the Global Magnitsky Human Rights Accountability Act (“Magnitsky Act”), sanctioned on December 21 a list of alleged international bad actors, including Dan Gertler, a billionaire and international businessman from Israel who has been involved in, among other notorious ventures, alleged corruption in the mining of diamonds and copper in the Democratic Republic of the Congo. The next day, OFAC then sanctioned individuals and entities allegedly associated with Thieves-in-Law, an alleged and unapologetically-named Eurasian criminal entity; according to the U.S. government, Thieves-in-Law originated in Stalinist prison camps and has grown over time into a “vast criminal organization” stretching across the globe and into the United States.…
Continue Reading OFAC Designates Diamond Mining Billionaire, “Thieves in Law,” and Many Other International Targets as Subject to U.S. Sanctions and Asset Freezes
We discuss two recent federal court opinions addressing two issues of increasing frequency and importance: (i) the potential civil liability of financial institutions to non-customers and other third-parties for alleged failures to implement an effective Anti-Money Laundering (“AML”) program; and (ii) the ability of private plaintiffs to sue foreign defendants who allegedly committed offenses against the plaintiffs abroad, and then laundered the proceeds of those offenses in the U.S. This second issue, of course, is relevant to U.S. government actions against foreign persons.
As we shall see, banks are not necessarily liable to anyone impacted by a bank’s alleged AML-related failures. Conversely, foreign defendants may be surprised by the ability of plaintiffs to haul them into U.S. court to redress alleged criminal offenses committed entirely abroad — if those foreign defendants sent the fruits of those offenses to the U.S. The case relevant to the latter point involves allegations of billions of dollars of theft and corruption committed in Kazakhstan as part of a complicated scheme to purchase high-end real estate in New York (a recurring theme in recent money laundering enforcement efforts, and in this blog) via European shell companies, using in part accounts held at the troubled foreign bank FBME, about which we have blogged before.…
Continue Reading The Courts Speak: Bank Liability for Alleged AML Failures Impacting Third Parties, and Hauling into U.S. Court Foreign Defendants Who Launder the Alleged Fruits of Foreign Crime
U.S. Money Laundering Charges Stemmed from Foreign Bribes to Foreign Official by Foreign Companies
On August 25, a U.S. District Court Judge for the Southern District of New York sentenced former Guinea Minister of Mines and Geology, Mahmoud Thiam, to seven years in prison, followed by three years of supervised probations, for laundering $8.5 million bribes paid to him by China Sonangol International Ltd. and China International Fun, SA (CIF). The judge also entered an order for the forfeiture of the full of $8.5 million of laundered funds. The sentence followed Thiam’s conviction by a jury in May 2017 of money laundering.
Although the alleged money laundering transactions charged in the indictment involved wire transfers from foreign banks to bank accounts held in New York City, all of the bribery which produced the illicit proceeds at issue in the money laundering charges occurred entirely overseas. As we will discuss, this case serves as a reminder that the offense of money laundering centers on a discrete financial transaction, not the underlying illegal activity. This case also illustrates the willingness of the U.S. Department of Justice (“DOJ”) to pursue cases primarily involving conduct which occurred abroad, and also how the DOJ may use the money laundering statutes – assuming that there is a U.S. jurisdictional hook – to pursue certain individuals who would be untouchable under the Foreign Corrupt Practices Act: the foreign officials themselves who are receiving the bribes.…
Continue Reading Former Guinean Minister of Mines Sentenced to Seven Years in Prison for Laundering $8.5 Million in Bribes Paid by Chinese Companies in Exchange for Mining Rights
On July 26, FinCEN, in coordination with the U.S. Attorney’s Office for the Northern District of California (“NDCA USAO”), assessed a $110,003,314 civil money penalty against BTC-e a/k/a Canton Business Corporation (“BTC-e”) for willfully violating the Bank Secrecy Act (“BSA”), and a $12 million penalty against Alexander Vinnik, a Russian national who is one of the alleged operators of BTC-e, for his role in the violations. FinCEN’s press release indicates that this is the first enforcement action it has taken against a foreign-located money services business (“MSB”) doing business in the United States. As we previously have blogged, FinCEN released interpretive guidance in March 2013 stating that an administrator or exchanger of virtual currency is an MSB under the BSA unless a limitation or exemption applies.
In a parallel criminal investigation, Vinnik was arrested and detained in Greece and charged in a 21-count superseding indictment brought by the NDCA USAO and DOJ’s Computer Crime and Intellectual Property Section. The superseding indictment alleges that Vinnik and BTC-e operated an unlicensed MSB doing business in the U.S., in violation of 18 U.S.C. § 1960, and committed money laundering, in violation of 18 U.S.C. §§ 1956 and 1957, by facilitating virtual currency transactions involving various crimes, including computer hacking, identity theft, tax refund fraud schemes, public corruption, and drug trafficking. The superseding indictment also provides some clues to the fate of the collapsed virtual currency exchange Mt. Gox, once reportedly the largest such exchange in the world.…
Continue Reading FinCEN Takes First Action Against Foreign-Located MSB—“The Virtual Currency Exchange of Choice for Criminals”—For Willfully Violating U.S. AML Laws
On Friday, the Department of Justice (“DOJ”) filed a civil forfeiture complaint in the Southern District of Texas seeking recovery of approximately $144 million in assets that allegedly represent the proceeds of foreign corruption and which were laundered in and through the U.S. The complaint’s narrative focuses on Diezani Alison-Madueke, who is Nigeria’s former Minister for Petroleum Resources. The 52-page complaint, which contains additional attachments, is very detailed – but nonetheless interesting reading – so we will discuss here only three salient points:
- The most eye-catching property subject to forfeiture, the spectacular yacht Galactica Star (which you can inspect here), apparently has no discernible nexus to the U.S. – except that the funds used to acquire the yacht allegedly were transferred through correspondent bank accounts at financial institutions which process their U.S. dollar wire transactions through the U.S.
- The complaint emphasizes the continued enforcement focus on high-end U.S. real estate as a potential vehicle for money laundering from abroad.
- The complaint purports to quote a recording of a conversation allegedly made by Ms. Alison-Madueke herself, in which she allegedly offers a co-schemer some critiques on his approach to laundering illicit funds.
Proposed Settlement Comes After Court Issues Rulings on Extraterritorial Application of U.S. Criminal Law, Evidence of Intent to Conceal and Tracing of Money Laundering Proceeds
On the eve of trial this past Friday, the government announced an agreement to settle, subject to court approval, a major civil forfeiture action in the Southern District of New York. In the case, United States v. Prevezon Holdings, Ltd. et al., the government alleged an elaborate scheme involving money laundering and other offenses committed in Russia, Cyprus, and Manhattan. The case gained some notoriety in the press due to lurid allegations of the suspicious death while in pretrial detention in Moscow of a Russian lawyer who had uncovered the tax refund fraud scheme, and the alleged defenestration earlier this year of a lawyer working for the decedent’s family. Although the civil forfeiture complaint filed in 2013 sought to forfeit at least $230 million worth of assets, the parties settled for approximately $5.9 million. In the wake of this settlement, both the defense and the government now appear to be claiming victory.
This post will analyze an opinion issued by the court in this case last week, prior to the settlement, denying summary judgment to the defense. The legal rulings contained therein are perhaps not as suitable for a Hollywood-style thriller as some of the content of the government’s press releases and pleadings, but nonetheless represent important issues in the field of money laundering and forfeiture. Primarily, we analyze an increasingly common and key question: when can U.S. law apply to conduct occurring primarily overseas? This question has broad implications for federal criminal law enforcement in general, including for RICO and tax fraud prosecutions, as well as for potential civil lawsuits brought by shareholders or other plaintiffs.…
Continue Reading Forfeiture Case Based on Alleged Elaborate $230 Million Russian Laundering and Fraud Scheme to Settle
The Supreme Court granted certiorari on April 3 to decide whether Jordan-based Arab Bank may be liable for claims including allegations that its New York branch processed transactions for known terrorists. While the central issue before the Court will be the scope of the Alien Tort Statute (“ATS”) – namely whether it permits corporate liability for violations of international law – Jesner v. Arab Bank also illustrates how alleged AML/BSA failures can lead to yet another avenue for secondary legal liability for financial institutions, as we previously have noted in other contexts. Depending on the outcome of the Court’s opinion in Jesner, such U.S. exposures may extend to foreign financial institutions even when the alleged conduct occurs primarily abroad.…
Continue Reading Weighing Corporate Liability under the Alien Tort Statute: What it Means for AML/CFT Controls